Friday, March 22, 2013

New Purchase - BNS

I used the rest of the money raised from the UNS sale to fund a new position: Bank of Nova Scotia.  Those who have followed me the past year know I'm fond of Canadian banks as long term holdings.  I like conservative lending practices, sound government policies and no dividend cuts during the recent financial crisis.  The financial institutions that tend to grab my attention are mostly from Canada which isn't surprising since Canada is known as a banking safe haven. 

BNS has paid dividends since 1832.  I absolutely love storied dividend histories like this, BNS has it in spades.  The dividend is so ingrained in the culture at this point that I feel very confident the streak will continue.  I plan to still be shareholder in 2032 which will mark 200 years.

I like the international strategy Scotia Bank uses to grow the business.  This is truly an international company with operations in over 55 countries.  I believe focusing on emerging markets for growth while using the Canadian market as an anchor will reward shareholders handsomely over the long term.

My calculated fair value for BNS is $69 which leads me to believe I was able to purchase these shares at an undervalued price.  I used DDM, DCF, average p/e, and average yield in the calculations.  BNS is currently trading below its 5 year average p/e and above its 5 year average dividend yield.  Even though it's had a major run up since last summer's lows, I feel there is some value left.

Assuming a $1US to $1CAN exchange rate, I'm locking in a yield slightly over 4%.  As with the KMI purchase I will realize an immediate passive income boost which is expected to grow at a faster pace than what UNS provided.  In reality I don't know the exact dividend.  Exchange rates fluctuate which I've observed with my TD and EIFZF holdings.

I made a mistake and entered the wrong amount when I placed this limit order.  I actually meant to type $57.83.  Oh well it's only a $2.90 difference.  I quickly placed the order after a 17 hour work day, I usually pay close attention to details like that.  It won't happen again.


New Purchase - SBSI

Southside Bancshares is the only stock I DRIP.  I do this because I want to increase my share count, but I don't want to throw new money at it.  I plan to keep the DRIP on for now.


Recent Dividend Increases
General Mills: 15.2%  Wow I was not expecting an increase like this!  My yield on cost is already  4.1% after just two increases.  If I only I had bought more last year.... whoops!

Raytheon: 10.0%  Yet another stellar RTN dividend boost.  My RTN position has already ballooned to a 5.0% YOC after only 2 increases.  I think I had lucky timing with this one though.

Air Products: 10.9%  This is exactly why I snatched up APD shares last October.  Air Products & Chemicals is a dividend champion with a history of delivering above average dividend growth, 2013 adds to the evidence.  YOC is now 3.6%, will it go over 4% next year?

Here's some motivation courtesy of RTN:


  1. Nice! What made you decide on BNS (and TD) amongst the Canadian banks?I just bought RY yesterday, because I thought it to be the most undervalued...

    1. I like the strategies TD and BNS use. BNS being mostly international, TD focusing on the US in addition to Canada. I am not as familiar with RY. In fact I've never even listened to a RY conference call. I keep hearing good things about them though. I probably ought to have a look.


  2. CI,

    Great buy here. I'm happy to have you on board as a fellow BNS shareholder.

    I think the financial sector still has some value in this market, while most of the utilities and consumer stocks are fairly pricey.

    I'm actually thinking about increasing my stakes in BNS, TD and WFC while also initiating a position in RY. The Canadian banks have some very strong yields and attractive valuations here.

    Cool videos and gotta love those dividend raises. I've never received a 15% raise at work.

    I wish I would have bought GIS before the HNZ deal. I've mostly been a huge fan of Buffett, but I really wish this HNZ deal wouldn't have been made. It brought already pricey stocks to further elevated levels. Now, PEP is in the news about M&A. Ugh...

    Best wishes!

    1. Yeah I really wanted to replace UNS with a different utility. There is nothing except PPL that I would buy right now from that sector. PPL has low DGR, but I think there is a little value there. I'll get back into utilities, just not right now.

      I still need to make a regular March purchase and I'm running out of days...

  3. For myself, I bought BMO purely cause the yield was higher than the other big banks in Canada. I always thought BNS rounded last on the big five banks in Canada as I don't see as many branches in Vancouer, BC. Boy, am I wrong! Their capitalization is way higher than BMO and CIBC than I previously thought. Thanks for the quick summary of BNS. At 52 week high, I am always leary of jumping in, got burnt many times with Apple HAHAHA!

    1. BNS is growing internationally, that seems to be the focus. To be honest, I've never been to a BNS bank. I try to absorb as much information as I can, but being Canadian might give you a leg up on me here.

      I used to bank with WFC, and it was a horrible experience. The interest rates on savings account was something like .05%, so I switched. Easy decision. I don't have any experiences like that with the Canadian banks though.

      Why anyone would ever enter a Wells Fargo bank is beyond me...